Once upon a time there lived the evil and vain Queen Koopa (Bowser). Day in and day out, she asked her magic mirror who the fairest in the land was, and it always said it wad her until one day it tells her that while she is the fairest in her land, Princess Peach, from the neighbouring kingdom, is the fairest in the world. From that moment on, Koopa is consumed with hatred for Peach, and eventually orders the Koopalings, Roy, Wendy, Morton and Iggy to erase her from the world.

Unaware of the danger, Peach is busy collecting flowers by a lake when she is beset by the Koopalings, who remark that it's a shame they have to erase such a cute princess. Peach screams for help, and is heard by Mario, who arrives just in time to fight off the Koopalings and flee with the damsel. They escape to a house in the woods that is filled with cute, tiny furniture. The seven dwarves of the forest, the Toads, soon come home and greet their old friend Mario, surprised but pleased to see him there. Mario tells them what happened and they vow to house and protect the princess for him, and he sets off on his travels once more.

Peach after biting into the poisonous apple.

Meanwhile, the Koopalings report back to the angry Queen Koopa, who sends them away and consults the mirror once more. But while it confirms that Peach is still the fairest of them all, it also tells the queen that she is hiding with the Toads. Koopa decides to deal with her herself, and concocts a poison in her basement chemistry lab, injecting it into an apple once it is ready.

In the forest, Peach has been happily doing the cooking and cleaning for the Toads when they go out to do their work, but while they are away, Koopa appears at the window, disguised as an old woman. She asks if Peach would like to buy some apples and suggest she try one to see how delicious they are. Excited about the prospect of sharing the apples with the Toads later, Peach takes a bite and instantly drops to the floor in a death-like sleep. Laughing, Koopa takes off her cloak and crows that she is now the fairest in the world, before flying off back to her castle.

When the Toads arrive home, they find Peach, and upon hearing their cries of sorrow over her death, Mario rushes back. He finds them standing around the princess, now laid out on a bed in the woods, and they tearfully tell him they couldn't guarantee her safety after all. While the Toads watch in bated breath, Mario takes out a potion given to him by a goddess he had helped in a foreign land and administers it to Peach, who then wakes up. The Toads cheer and Mario is relived, but when Peach recalls that she had eaten an apple before falling asleep, he reasons that it must have been Koopa and runs off in a rage, intent on punishing her for what she did.

Some of the Toads rejoicing.

With Peach and the Toads right behind him, Mario enters the castle and plows through an army of Goombas, finally confronting Koopa in her throne room. However, she sicks Roy, Wendy, Morton and Larry on Mario, and they blast him with electricity from their magic wands as Peach cries out and Koopa laughs in triumph. But then the Toads leap into Mario, giving him a power-up: he grows larger and breaks free of the shock, promptly sends the Koopalings flying and then chases after Koopa. Before he can catch her, she grabs Peach and holds a knife to the princess's throat, forcing Mario to stop in his tracks.

Once more surrounded by the Toads, Mario is unsure of what to do, but just then Luigi appears to help his brother. He hits Koopa over the head with a mallet and while Peach returns to Mario's side, Luigi delivers a kick to the queen's stomach. The two brothers then fling her against the magic mirror, and she lands in a heap on the floor while the protagonists laugh. Mario, Luigi, Peach and the Toads then leave Koopa's Castle and live happily ever after.